2020
Supply Chain
Management 2
IB YEAR 2 PERIOD 3
,PRODUCING GOODS AND
SERVICES
THE ROLE OF PRODUCTION OPERATIONS IN SCM
- Form Utility: transformation of a good or service
- Effective Production Operation: design and execute effective processes, make
supply chain tradeoffs, achieve economies of scale, address competition challenges
and other problems
- Process Functionality: ability to perform different processes from those of
competitors to create unique products or services, or to perform the same processes
but better than the competition
- Make-to-stock (MTS)
- Make-to-order MTO)
- Assemble-to-order (ATO)
- Build-to-order (BTO)
- Engineer-to-order (ETO)
- Production Tradeoffs:
- Volume vs. Variety:
- Economies of Scale: higher-volume production with lower cost per
unit of output; suitable in situations where production processes have
high fixed costs and equipment
- Economies of Scope: low-volume production with flexible capabilities
of producing a wide variety of products; important in markets
characterized by changing customer demand
- Responsiveness vs. Efficiency:
- Centralized vs. Regional: centralized production facilities provide
operating cost and inventory efficiencies; regional production facilities
allow companies to be closer to customers and more responsive
- Large vs. Small: larger facilities with excess capacity provide the
flexibility to respond to demand spikes; smaller facilities that are better
utilized are more cost efficient
- Product-focused vs. Process-focused: product-focused facilities
performing many processes on a single product type are more
responsive; process-focused facilities concentrating on a few functions
across multiple product types are more efficient at its limited scope of
activities
- Production Costs vs. Supply Chain Costs: consider different
production/purchasing costs, transportation costs, or inventory/warehouse
costs when deciding between ATO, MTS, and BTO
- In-house (Make) vs. Outsource (Buy): internal production processes are
more directly visible, and quality is easier to control; outsourcing comes with
, lower production costs and frees up resources for other strategic needs but
are more difficult to control over quality, intellectual property rights, and
customer relationships
- Production Challenges:
- Comply with increased regulation and traceability requirements
- Keep up the pace of product innovation
- Overcome a shortage of skilled labor
- Control capital, pay, and benefit costs
- Manage environmental concerns
- Balance productivity throughput with maintenance requirements
- Manage competitive pressure driven by globalization
- Synchronize activities with the supply chain
- Competitive pressure
- Customer’s demand for choice and rapidly changing tastes
- Labor productivity
OPERATIONS STRATEGY AND PLANNING
Production Strategies:
- Mass Production:
- Market differentiator: cost & inventory protection
- Process option: make-to-stock
- Materials release: push
Performance focus: production throughput
- Limitation on producer’s responsive-ness
- Potential for the bullwhip effect
- Lean Manufacturing:
- Market differentiator: quality & waste reduction
- Process option: assemble-to-order
- Materials release: pull
- Performance focus: cost management
- Difficult to achieve economies of scale
- Require technological capabilities to achieve the supply chain visibility and
synchronization
- Increased risk of disruption
- Flexible Manufacturing:
- Market differentiator: availability & leverage resources
- Process option: build-to-order & engineer-to-order
- Materials release: pull
- Performance focus: segment market share
- High capital investment
- System complexity
- Require skilled technician
- Require disciplined & high level of planning
- Reactive Capability: machine flexibility, routing flexibility
- Adaptive Manufacturing:
Supply Chain
Management 2
IB YEAR 2 PERIOD 3
,PRODUCING GOODS AND
SERVICES
THE ROLE OF PRODUCTION OPERATIONS IN SCM
- Form Utility: transformation of a good or service
- Effective Production Operation: design and execute effective processes, make
supply chain tradeoffs, achieve economies of scale, address competition challenges
and other problems
- Process Functionality: ability to perform different processes from those of
competitors to create unique products or services, or to perform the same processes
but better than the competition
- Make-to-stock (MTS)
- Make-to-order MTO)
- Assemble-to-order (ATO)
- Build-to-order (BTO)
- Engineer-to-order (ETO)
- Production Tradeoffs:
- Volume vs. Variety:
- Economies of Scale: higher-volume production with lower cost per
unit of output; suitable in situations where production processes have
high fixed costs and equipment
- Economies of Scope: low-volume production with flexible capabilities
of producing a wide variety of products; important in markets
characterized by changing customer demand
- Responsiveness vs. Efficiency:
- Centralized vs. Regional: centralized production facilities provide
operating cost and inventory efficiencies; regional production facilities
allow companies to be closer to customers and more responsive
- Large vs. Small: larger facilities with excess capacity provide the
flexibility to respond to demand spikes; smaller facilities that are better
utilized are more cost efficient
- Product-focused vs. Process-focused: product-focused facilities
performing many processes on a single product type are more
responsive; process-focused facilities concentrating on a few functions
across multiple product types are more efficient at its limited scope of
activities
- Production Costs vs. Supply Chain Costs: consider different
production/purchasing costs, transportation costs, or inventory/warehouse
costs when deciding between ATO, MTS, and BTO
- In-house (Make) vs. Outsource (Buy): internal production processes are
more directly visible, and quality is easier to control; outsourcing comes with
, lower production costs and frees up resources for other strategic needs but
are more difficult to control over quality, intellectual property rights, and
customer relationships
- Production Challenges:
- Comply with increased regulation and traceability requirements
- Keep up the pace of product innovation
- Overcome a shortage of skilled labor
- Control capital, pay, and benefit costs
- Manage environmental concerns
- Balance productivity throughput with maintenance requirements
- Manage competitive pressure driven by globalization
- Synchronize activities with the supply chain
- Competitive pressure
- Customer’s demand for choice and rapidly changing tastes
- Labor productivity
OPERATIONS STRATEGY AND PLANNING
Production Strategies:
- Mass Production:
- Market differentiator: cost & inventory protection
- Process option: make-to-stock
- Materials release: push
Performance focus: production throughput
- Limitation on producer’s responsive-ness
- Potential for the bullwhip effect
- Lean Manufacturing:
- Market differentiator: quality & waste reduction
- Process option: assemble-to-order
- Materials release: pull
- Performance focus: cost management
- Difficult to achieve economies of scale
- Require technological capabilities to achieve the supply chain visibility and
synchronization
- Increased risk of disruption
- Flexible Manufacturing:
- Market differentiator: availability & leverage resources
- Process option: build-to-order & engineer-to-order
- Materials release: pull
- Performance focus: segment market share
- High capital investment
- System complexity
- Require skilled technician
- Require disciplined & high level of planning
- Reactive Capability: machine flexibility, routing flexibility
- Adaptive Manufacturing:
